Inventory distortion fails retailer sales strategies

The single biggest in any retailer's profit and loss is hiding in plain sight, and the technology exists to tackle it, argues Guy Hipwell, non-executive director at PervasID

We've all seen it – the frustrated customer leaving empty-handed because the one item they wanted, which your website stated was in stock, is nowhere to be found. 

We've seen store staff scrambling to locate phantom inventory and complaining that this "happens all the time." 

These common issues aren't just simple stock issues; they represent a fundamental breakdown of trust, and in retail, trust is the only currency that matters. Lose a sale today, and you might lose a customer and their loyalty for good.

In 2024, so-called 'inventory distortion' costs retailers a collective $1.7 trillion. Most retailers report inventory accuracy rates between 65% and 83%; is this really what we expect customers to accept in 2025? 

Would you accept a bank that could only find your money eight times out of ten? It's a level of inaccuracy we would consider unacceptable in any other critical industry. Yet, in retail, it remains the norm.

This isn't merely an administrative problem; it's a strategic failure.

Making availability strategic 

For too long, inventory management and accuracy have been relegated to back-office tasks and a cost-centre mentality. However, this is a boardroom-level strategic failure, and poor accuracy is becoming the silent killer of key performance indicators (KPIs).

Retailers are leaking profit through lost sales, forcing markdowns, bloating supply chains, and driving up labour costs. However, retailers embracing real-time, item-level accuracy are seeing transformative results:

• Sales uplift: A consistent 1.5-5.5% increase, with some items jumping by 8% once 'out-of-stocks' are eliminated.
• Margin improvement: A 1.0-3.5% increase in full-price sell-through, plus up to 1.5% in revenue from shrinkage reduction.
• Operational efficiency: 10-15% fewer labour hours wasted on manual counts and searching for stock.
• Customer experience: Satisfaction is rising, with up to 50% fewer out-of-stocks, meaning customers find what they want and buy it when they want to.

These are tangible results awaiting those willing to embrace change and move from current industry norms towards 99% accuracy.

The customer experience connection

Your customer doesn't care about your backend systems, your enterprise resource planning (ERP), or siloed channel data. They care about one thing – getting their hands on the latest products that they want, when, how, and at exactly the point they are ready to buy.

Whether it's click-and-collect, ship-from-store, or simply checking stock via an app before heading to the store, every modern retail experience depends entirely on one data point – do you actually have the item?

Get it wrong, and you break the promise made to the customer. Get it right, and a retailer can create a seamless experience that builds loyalty and encourages repeat business.

The bottom line

Inventory accuracy is no longer a "nice-to-have" operational or back-office task. It is arguably the single most significant, most accessible growth lever available to many retailers today.

Fixing inventory accuracy isn't about trading off efficiency for experience; it's one of the few business initiatives that achieves both, simultaneously reducing operational waste and boosting customer satisfaction.

The data is clear, the solution available, and the technology mature. Radio frequency identification (RFID) is already unlocking significant opportunities for retailers ready to explore what is possible right now.

Guy Hipwell is a former retail executive, investor and non-executive director at PervasID.